Industrial Midwest

Made in America

Throughout the past decade the United States has focused on reducing our reliance on the manufacturing industry while looking to boost the service industry to create more jobs – particularly in the financial sector. However, as was made clear by the devastating turn of events in the past few years, our economy cannot rest solely on the strength (or lack thereof) of our financial industry.

By Jeanne Rogers

Executive Vice President - Arthur J. Rogers & Co.

One of the hot button topics in today’s political environment is jobs. The economic downturn of the past few years came with staggering job losses; and while we have moved toward recovery, the unemployment numbers remain at staggering highs. According to the United States Depart of Labor’s Bureau of Labor Statistics, the national unemployment rate as of July 2011 is 9.2 percent (up from 9.1 percent in May), and in Illinois it’s hovering around 8.9 percent. In other words jobs, and job creation, will be the number one issue of the 2012 presidential election debates.

Regardless of where you fall on the political spectrum, common rhetoric in the jobs debate focuses on the loss of manufacturing positions to other countries, China in particular. It’s a charged course of dialogue that easily elicits fear in many Americans; after all, the thought of losing a significant portion of the country’s livelihood to a growing foreign powerhouse can be quite intimidating. And this isn’t a new phenomenon. Throughout the past decade the United States has focused on reducing our reliance on the manufacturing industry while looking to boost the service industry to create more jobs – particularly in the financial sector. However, as was made clear by the devastating turn of events in the past few years, our economy cannot rest solely on the strength (or lack thereof) of our financial industry.

Case in point, as was noted in an article published June 27th in the Wall Street Journal entitled, “Is Germany Turning into the Strong, Silent Type” both the United States and the United Kingdom admonished Germany for “clinging to an outdated manufacturing base that couldn't possibly compete with lower-cost industries in China and Eastern Europe.” The view from outside Germany was that the country should focus on deregulation while seeking more growth in the financial services industry. Sound like a familiar course of action? However, while we Americans are shaking our heads in hindsight, Germany had some foresight.

Today the German economy is the strongest in the West and is well-positioned for many years of increasing exports. So how did they do it? According to the same article in the WSJ, former German economy minister, Michael Glos touts, “We got through the crisis better than almost any other country. It isn't a miracle, it's because we stuck to manufacturing whereas other countries deindustrialized.” Germans held to several philosophies in order to make this work, including an aversion to debt and a belief that quality goods do create prosperity. Or as the article said, “…solid public finances, a balance between business flexibility and a strong social safety net, and a belief that well-made goods, not financial wizardry, are the foundation of [Germany’s] prosperity.”

What is the lesson for Chicago, as well as the rest of the nation, in all of this? Quality goods do matter. Rather than being overly concerned about the loss of low-paying manufacturing jobs to China; we should instead focus on what we do well here in America – and what we do well is produce educated, talented and creative engineers, designers and entrepreneurs who in turn create quality products. High-quality goods do pay off, just ask Germany whose “Made in Germany” label has become associated with a quality many find worth paying for – including China. In fact, the same scenario is paying off for many U.S. manufactures today. It’s not just a hypothetical situation – it is actually happening.

According to the U.S. Census Bureau, U.S. exports to China in 2000 totaled around $16 billion while U.S. imports from China totaled about $100 billion – or 6-1/4 times more imports than exports. This is about what you’d expect given our national rhetoric, but the interesting thing to note here is how those numbers look 10 years later. In 2010, U.S. exports to China approached $92 billion and imports came in around $365 billion. The difference in imports this time is only 3.9 times more than that of exports.

While these statistics are due in part to the weak U.S. Dollar, it’s also directly related to the fact that the U.S. produces a quality product – particularly when it comes to machinery – and those products are desirable in the production of other goods. Also contributing to the statistics are an improved U.S. productivity and a drive to move manufacturing closer to where the products are being sold. This, in and of itself, is a huge benefit for the U.S. which boasts the largest consumer market in the world. Additionally, the U.S. is in a position to improve the manufacturing process. We have a vast number of out-of-the-box thinkers and entrepreneurs, all of which put the country in a position of strength when it comes to manufacturing.

Where does this leave us, particularly with such a large industrial and manufacturing base in the Chicago area? In a solid position to export parts and machinery to other nations which then finish the production process; thereby creating a truly global manufacturing industry. It’s an exciting time to be in manufacturing and despite what you may read, consider the following from an article entitled “The Exaggerated Rumor of Manufacturing’s Death” by Mark Henricks and featured on Bnet, The CBS Interactive Business Network, “…the torch as top global manufacturer passed to China. That’s a momentous event, surely, but it’s worth noting that China, though producing slightly more than the U.S., has a population more than four times as large. U.S. manufacturers still produce twice as much as Japan, three times as much as Germany, and 10 times as much as India.”

So what’s the moral of this story? We just need to look to our neighbor to the West for answers. Patience, fiscal responsibility and a reliance on our strengths – education, talent and quality – will serve our manufacturing industry, and ultimately our entire economy well in the long-run. We don’t need to fear China, or bemoan the loss of our low-paying manufacturing jobs. In fact, U.S. manufacturing levels are at the highest levels in seven years, according to the Institute for Supply Management. What we need and what we can have, is access to well-paying, quality jobs. We don’t need jobs for jobs’ sake. We need jobs that will offer the citizens of this country a better living. Likewise, we don’t want to be a low-priced provider of goods. We want to be known for quality. We want “Made in America” to carry behind it the force of our great nation.